Seasonal Demand

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QUESTION 1
a) Seasonal demand can be consumer interest in purchasing particular products only during a specific period within the calendar year. For example, Christmas trees, most fruits, school books and uniforms, TVs, cards and tourism sector among others are subject to seasonal demand. There are certain problems that are associated with this kind of seasonal demand they include;

Over stocking is one of the problems of this kind of demand. Seasonal demand poses problems for businesses because they have to build up stocks for sale during the period of peak demand. Stocks are expensive to keep. Before the world cup electronic shops have to keep large stocks of TVs waiting for the high sale period. This is the same thing with bookshops that have to stock up awaiting the January sale season.

Relatedly, firms are also caught with too many stocks if peak demand sales fail to live up to expectation, but sales are lost if peak demand exceeds expectations. Failure of reaching the expected sales can lead to high losses especially for perishable goods. For example flower shops had large stocks of flowers anticipating the high sales during the valentine period counted losses if they didn’t sell all their stocks.

Seasonal unemployment also arises from this kind of demand. Due to low sales during the low season the organizations are forced to lay off some of the employees they had during the boom period. For example hotels that have very high number of customers during the December period lack customers during the off-peak period are forced to lay off some of their staff during this periods.

Hoarding can also arise in this kind of demand. This means some of the sellers or producers can hide their products because they anticipate high demand. For example the petrol stations that hide the petroleum products before charismas because they know people are travelling.

To the consumers high prices may be associated with seasonal demand. The sellers or producers take advantage of the high demand to charge exorbitant prices since there is high demand. For example the bus companies who know people are travelling upcountry during the festive season and charge high prices

b) Managers of firms that exhibit seasonal demand can solve the above problems in the following ways;Employing a product mix within the product. If the demand is regular there would be a need to employ a product mix in order to ensure survival. For example card maker who makes charismas cards can also start making cards for other occasions like Easter, birthdays, weddings, valentine, anniversaries to sustain him throughout the year.Labour management may be another way to solve the problems. Workforce adjustments may take the form of flexible arrangements depending upon the nature of the business, the job training required, and the severity of the desired volume leverage. For example temporary personnel provided no more than three weeks training applies. Some organizations maintain a register of students, housewives, or retirees seeking temporary employment. Short-term employment contracts (full or part time) can also be done. A typical contract lasts three months. Hence some casual workers report for just a few hours of continuous work. For example supermarkets can hire any number of unskilled workers for a single shift at a time, with just a day’s notice, from a specialist employment agency. Preparing a production schedule can also ease the problem. This means creating genuine aggregate plan of different seasons throughout the year. This can be done by looking at the past trends and coming up with total labour and inventory costs each month of the year. For example a bookshop can draw up a plan when they have large demands especially before schools reopen and calculate the labour and inventory costs for each month.Subcontracting is also another way to ease the problem of seasonal demand. This means giving another firm that deals in that kind of...
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